Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Apple Inc. (AAPL), Microsoft Corporation (MSFT): Survival of the Biggest Phablet

Product cannibalization is a normal part of the tech world, and if the latest research from IDC proves true, then smaller tablets are the latest on the dinner menu.

Survival of the biggest
The latest research from IDC shows that phablet smartphones — you know, the ones with 5-inch screen sizes and even larger — are outpacing small tablet shipments. In the Asia Pacific region excluding Japan, tech companies shipped more than 25.2 million phablets in the second quarter, compared with 12.6 million tablets – an increase of 620% year over year. But it’s not just the Asia Pacific region that’s experiencing the trend toward larger smartphones. The IDC expects phablets to start cutting into sales of smaller tablets over the next year.

That doesn’t mean small tablets are doomed, but rather that the huge growth we’ve been seeing from the tablet market may take a bit of a hit as phablets encroach on the market.

Samsung Galaxy Mega 6.3. Source: Samsung.

So what does that mean for top tablet vendors such as Apple Inc. (NASDAQ:AAPL) and Samsung?

For Samsung, maybe not much. The company is already knee-deep in the phablet market and shows no sign of changing course right now. Samsung just recently released the large Galaxy Mega 6.3 and the the Galaxy Note 3, and so far consumers have been pleased with the company’s assortment of sizes. While the large smartphones may eat into some of its tablet sales, the company is well diversified within both segments and still holds a growing No. 2 tablet vendor spot.

Meanwhile, Apple Inc. (NASDAQ:AAPL) just launched two new phones, the 5c and 5s, but stuck to its guns and still only offers a 4-inch diagonal display. While there have been reports that the company is testing phones up to 6 inches, the earliest we’d see a larger phone from Apple would be a year from now, if then.

Apple iPhone 5c. Source: Apple.

If Apple Inc. (NASDAQ:AAPL) doesn’t release a larger phone, the company’s dilemma could be twofold. First, Apple could be losing smartphone sales to Samsung and others because it lacks a larger phone offering. Samsung’s phones range from 5 inches up to 6.3 inches — while Apple offers only the 3.5-inch iPhone 4s or the 4-inch 5c and 5s. If the phablet trend continues, which IDC seems to think it will, then Apple may already be a step behind the competition.

Second, consumers may start choosing Android phablets over Apple Inc. (NASDAQ:AAPL)’s iPad Mini. Right now, Apple is the world’s largest tablet vendor by shipments, but Apple could lose some ground as large smartphones eat into future tablet growth. Apple’s tablet crown has taken a bit of a beating compared to Android’s growing market share, and phablets are only adding more competition. A refreshed iPad Mini in October may help Apple push back the larger phones, but it’s no guarantee.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.